ML15121A770

Lacrosse Boiling Water Reactor - Financial Statement and Auditors' Report

ML15121A770
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	04/28/2015
From:	Nick B A Dairyland Power Cooperative
To:	Document Control Desk, Office of Nuclear Material Safety and Safeguards
References
LAC-14343
Download: ML15121A770 (31)

Text

BARBARA A. NICKPresident and CEODAIRYLAND POWERCOOPERATIVE April 28, 201510 CFR 50.71(b)In reply, please refer to LAC-14343 DOCKET NO. 50-409ATTN: Document Control DeskU.S. Nuclear Regulatory Commission Washington, DC 20555-0001

SUBJECT:

Dairyland Power Cooperative La Crosse Boiling Water Reactor (LACBWR)Possession-Only License DPR-45Financial Statement and Auditors' Report

REFERENCE:

1) 10 CFR 50.71(b)In accordance with the requirements of Reference 1, we are forwarding three (3) copies of the Financial Statements and Independent Auditors' Reports for Dairyland Power Cooperative as of December 31,2013 and 2012. We will forward our 2013 Annual Report to you as soon as it is completed.

Sincerely, Barbara A. NickPresident and CEOBAN:plsEnclosures cc: Cynthia D. Pederson, Regional Administrator Marlayna Vaaler, FSMEEd Bowen, DPCCheryl Olson, LACBWRmtoo,(~A Touchstone Energy' Cooperative

____3200 East Ave. S.

• PO Box 817

• La Crosse, WI 54602-0817

• 608-787-1235

• 608-787-1321 fax

• www.dairynet.com Dairyland Power Cooperative is an equal opportunity provider and employer.

STATE OF WISCONSIN

))COUNTY OF LA CROSSE )Personally came before me this day of ,2015, the abovenamed, Barbara A. Nick, to me known to be the person who executed the foregoing instrument andacknowledged the same.Nota'y PNu6lic, La Crosse County Wisconsin LAURIE A. ENGENNotary Public My commission expires -'State of WisconsIn aDairyland PowerCooperative andSubsidiary Consolidated Financial Statements as of andfor the Years Ended December 31, 2014 and 2013,and Independent Auditors' Report Dairyland PowerCooperative andSubsidiary Consolidated Financial Statements as of andfor the Years Ended December 31, 2014 and 2013,and Independent Auditors' Report D e lo itte .Deloitte

& Touche LLPSuite 280050 South Sixth StreetMinneapolis, MN 55402-1538 USATel: +1 612 397 4000Fax: +1 612 397 4450www.deloitte.com INDEPENDENT AUDITORS' REPORTBoard of Directors Dairyland Power Cooperative La Crosse, Wisconsin We have audited the accompanying consolidated financial statements of Dairyland Power Cooperative andsubsidiary (the "Cooperative"),

which comprise the consolidated balance sheets as of December 31, 2014and 2013, and the related consolidated statements of revenues,

expenses, and comprehensive income,member and patron equities, and cash flows for the years then ended, and the related notes to theconsolidated financial statements.

Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; thisincludes the design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of consolidated financial statements that are free from material misstatement, whether due tofraud or error.Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica.

Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements.

The procedures selected depend on the auditor's

judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to theCooperative's preparation and fair presentation of the consolidated financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the Cooperative's internal control.

Accordingly, we express no such opinion.

An auditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.Member ofDeloitte Touche Tohmatsu Limited OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the financial position of the Cooperative as of December 31, 2014 and 2013, and the results of theiroperations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America./--4~e70001'" z4oMarch 26, 2015 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2014 AND 2013(In thousands) 2014 2013ASSETSELECTRIC PLANT:Plant and equipment-at original cost $1,520,662

$1,544,037 Less accumulated depreciation (545,215)

(547,584)

Net plant and equipment 975,447 996,453Construction work in progress 162,529 92,593Total electric plant 1,137,976 1,089,046 OTHER ASSETS:Nuclear decommissioning funds 92,954 91,398Investments under debt agreements-marketable securities 3,777 3,774Other property and investments 10,197 38,217Investments in capital term certificates of National RuralUtilities Cooperative Finance Corporation 9,176 9,176Regulatory assets (Note 1) 35,348 20,462Investment for deferred compensation 1,391 1,481Deferred charges (Note 1) 25,924 26,785Total other assets 178,767 191,293CURRENT ASSETS:Cash and cash equivalents 25,871 30,318Accounts receivable:

Energy sales-net of allowance for doubtful accounts of$10 for 2014 and 2013 40,478 39,122Other 3,340 2,428Inventories:

Fossil fuels 41,236 42,425Materials and supplies 19,090 20,166Prepaid expenses and other 10,416 8,326Total current assets 140,431 142,785TOTAL $1,457,174

$1,423,124 (Continued)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2014 AND 2013(In thousands) 2014CAPITALIZATION AND LIABILITIES CAPITALIZATION:

Member and patron equities:

Membership feesPatronage capitalAccumulated other comprehensive incomeTotal member and patron equitiesLong-term obligations (Note 6)Total capitalization OTHER LIABILITIES:

Estimated decommissioning liabilities Asset retirement obligations Postretirement health insurance obligation Accrued benefitsDeferred compensation Obligations under capital leasesOther deferred creditsTotal other liabilities COMMITMENTS AND CONTINGENCIES (Note 10)CURRENT LIABILITIES:

Current maturities of long-term obligations and obligations under capital leasesLine of creditAdvances from member cooperatives Advances from Great River EnergyAccounts payableAccrued expenses:

Payroll, vacation, and benefitsInterestProperty and other taxesOther$ 1231,1962,7192013$ 15211,7423,098214,855233,916866,918 826,1141,100,834 87,9364,3704,1131,0441,3913,1869,556111,5961,040,969 90,4684,2973,6135,1451,4811,0358,906114,94546,619127,00013,5306,56832,65144,596159,00011,41611,97226,2697,7013982,9032,95510,7203272,6464,683Total current liabilities 244,744 267,210TOTAL$1,457,174

$1,423,124 (Concluded)

See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES AND COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013(In thousands) 20142013UTILITY OPERATIONS:

Operating revenues:

Sales of electric energyOther$425,364

$425,98122,300 17,114447,664 443,095Total operating revenuesOperating expenses:

FuelPurchased and interchanged powerOther operating expensesDepreciation and amortization Maintenance Property and other taxes121,885102,47180,46242,52135,3307,877151,02466,94588,54541,58027,3618,053Total operating expensesOperating margin before interest and otherInterest and other:Interest expenseAllowance for funds used in construction-equity Other-net 390,546 383,50857,11841,188(1,873)14759,58741,714(1,187)794Total interest and otherOperating marginNonoperating margin (Note 1)NET MARGIN AND EARNINGSOTHER COMPREHENSIVE (LOSS) INCOME-Postretirement healthinsurance obligation adjustments 39,462 41,32117,6565,20722,86318,2663,75022,0164,674(379)COMPREHENSIVE INCOME$ 22,484 $ 26,690See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER AND PATRON EQUITIESFOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013(In thousands)

Membership Fees$ 15Accumulated OtherComprehensive Income (Loss)$ (1,576)Patronage Capital$192,85622,016BALANCE-December 31, 2012Net margin and earningsPostretirement health insurance obligation adjustments Retirement of capital creditsBALANCE-December 31, 2013Net margin and earningsPostretirement health insurance obligation adjustments Return of membership feesRetirement of capital creditsBALANCE-December 31, 20144,67415(14)$13,098(379)$ 2,719(3,130)211,74222,863TotalMemberand PatronEquities$191,29522,0164,674(3,130)214,85522,863(379)(14)(3,409)$233,916(3,409)$231,196See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013(In thousands) 2014 2013CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings

$ 22,863 $ 22,016Adjustments to reconcile net margin and earnings to net cash providedby operating activities:

Depreciation and amortization:

Charged to operating expenses 42,521 41,580Charged through other operating elements such as fuel expense 1,704 1,854Allowance for funds used in construction-equity (1,873) (1,187)Changes in operating elements:

Accounts receivable (2,268) (803)Inventories 1,781 11,109Prepaid expenses and other assets (1,196) (26,661)Accounts payable 8,543 (52)Accrued expenses and other liabilities (6,419) 961Deferred charges and other (12,776) 17,647Total adjustments 30,017 44,448Net cash provided by operating activities 52,880 66,464CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions (89,490)

(80,345)Advances to nuclear decommissioning funds (75) (1,581)Purchase of investments (135,080)

(211,221)

Proceeds from sale of investments and economic development loans 163,204 211,344Net cash used in investing activities (61,441)

(81,803)CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under line of credit 115,000 116,000Repayments under line of credit (147,000)

(143,800)

Borrowings under long-term obligations 92,588 129,640Repayments of long-term obligations (49,761)

(89,428)Retirement of capital credits (3,423) (3,130)Borrowings of advances from member cooperatives 248,194 256,905Repayments of advances from member cooperatives (251,484)

(251,743)

Net cash provided by financing activities 4,114 14,444NET DECREASE IN CASH AND CASH EQUIVALENTS (4,447) (895)CASH AND CASH EQUIVALENTS-Beginning of year 30,318 31,213CASH AND CASH EQUIVALENTS-End of year $ 25,871 $ 30,318SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest

$ 43,413 S 43,514Electric plant additions funded through accounts payable and accrued expenses

$ 8.790 $ 6.629Electric plant additions under capital leases $ 3,395 $ -See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013(All dollar amounts in thousands)

1. NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsidiary

("Dairyland" or the "Cooperative")

is anelectric generation and transmission cooperative organized under the laws of the states of Wisconsin andMinnesota.

The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to class A members engaged in the retail sale of electricity to member consumers locatedin Wisconsin, Minnesota, Iowa, and Illinois, and provides electric and other services to class C, D, and Emembers.Principles of Consolidation-The consolidated financial statements include the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa FuelTech, Inc. All significant intercompany balancesand transactions have been eliminated in consolidation.

Accounting System and Reporting-The accounting records of the Cooperative are maintained inaccordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Utilities Service (RUS), the Cooperative's principal regulatory agency.Electric Plant-The cost of renewals and betterments of units of property (as distinguished from minoritems of property) includes contract work, direct labor and materials, allocable

overhead, and allowance for funds used during construction, and is charged to electric plant accounts.

Included in accumulated depreciation are nonlegal or noncontractual costs of removal components.

As a result, the cost of unitsof property

retired, sold, or otherwise disposed of, plus removal costs, less salvage, is charged toaccumulated depreciation and no profit or loss is recognized in connection with ordinary retirements ofproperty units. A provision for these nonlegal or noncontractual costs of removal components isrecognized based on depreciation rates determined by a third-party depreciation study completed inJuly 2011 and approved by RUS in 2012. The Cooperative is unable to obtain the information toseparate the cumulative removal costs as of December 31, 2014 and 2013. Maintenance and repair costsand replacement and renewal of minor items of property are charged to operations.

Depreciation-Depreciation, which is based on the straight-line method at rates that are designed toamortize the original cost of properties over their estimated useful lives, includes a provision for the costof removing and decommissioning the properties.

The provision for depreciation averaged 3.0% and2.9% of depreciable plant balances for 2014 and 2013, respectively.

Allowance for Funds Used during Construction-Allowance for funds used during construction (AFUDC) represents the cost of external and internal funds used for construction

purposes, and iscapitalized as a component of electric plant by applying a rate (3.16% in 2014 and 3.04% in 2013) tocertain electric plant additions under construction.

The amount of such allowance was $3,311 in 2014and $2,116 in 2013. The borrowed funds component of AFUDC for 2014 and 2013, was $1,438 and$929, respectively (representing 1.37% and 1.33% in 2014 and 2013, respectively).

The equitycomponent of AFUDC for 2014 and 2013 was $1,873 and $1,187, respectively, (representing 1.79% and1.71% in 2014 and 2013, respectively).

The borrowed funds components were included as a reduction ofinterest expense in the consolidated statements of revenues,

expenses, and comprehensive income.

Deferred Charges-Deferred charges represent future revenue to the Cooperative associated with coststhat will be recovered from customers through the rate-making process.

As of December 31, 2014, theCooperative's deferred charges are being reflected in rates charged to customers.

If all or a separable portion of the Cooperative's operations become no longer subject to the provisions of regulatory accounting, a write-off of deferred charges would be required, unless some form of transition recovery(refund) continues through rates established and collected for the Cooperative's remaining regulated operations.

In addition, the Cooperative would be required to determine any impairment to the carryingcosts of deregulated plant and inventory assets. The noncurrent portion of deferred charges as ofDecember 31, 2014 and 2013, include the following:

2014 2013Premiums on debt refinancing

$ 575 $ 675Renewable energy power purchase agreements 974 1,069Deferred billings and collections 86 212Pension prepayment 18,829 21,519Deferred litigation expenses 5,274 3,282Other 186 28Total deferred charges $25,924 $26,785Premiums on debt refinancing are being amortized over approximately 20 years (the remaining life ofrelated original debt). Renewable energy power purchase agreements are being amortized over the20-year term of the agreements.

Deferred billings and collections include project costs to be billed toothers during or upon completion of the projects, and noncurrent receivables.

As discussed in Note 11,the Cooperative made a voluntary prepayment in 2013 to its multiemployer defined-benefit pension planto reduce future funding amounts.

This prepayment will be amortized to benefits expense over ten yearsbeginning in 2013 as prescribed by RUS. Litigation expenses from the second nuclear contract damagesclaim against the United States government, as discussed in Note 15, are being deferred pending theoutcome of that litigation.

Investments-Investments in marketable debt and equity securities classified as available for sale arereported at fair value, with the interest, dividend income, and realized gains reported in nonoperating margin. The Cooperative continually monitors the difference between cost and estimated fair value of itsinvestments.

If any of the Cooperative's investments experience a decline in value that the Cooperative believes is other than temporary, the Cooperative will realize the loss as a reduction in investment income on decommissioning funds. In 2014 and 2013, the Cooperative realized

$1,994 and $1,614,respectively, of losses on these investments as a result of other-than-temporary impairment (OTTI).Regulatory Assets and Liabilities-The Cooperative's accounting policies and the consolidated financial statements conform to accounting principles generally accepted in the United States ofAmerica applicable to electric cooperatives.

During 2014, the Cooperative established a regulatory assetrelated to unrecovered plant balances upon closure of the Alma 4&5 generating stations.

This will beamortized through rates over 10 years beginning in 2015 with the expected 2015 portion included inother current assets. During 2013, the Cooperative established a regulatory asset of $16,700 forincreased estimated costs in the nuclear decommissioning liability.

The amortization of this regulatory asset will be deferred pending the outcome of the second nuclear contract damages claim with the U.S.government as described in Note 15. The regulatory asset created in 2013 related to the estimated costsof a special early retirement plan to be offered to certain age-eligible employees at specific Cooperative locations in 2014 was expensed in 2014.

The regulatory assets as of December 31, 2014 and 2013, include the following:

2014 2013Alma 4&5 unrecovered plant balances

$18,648 $ -Nuclear decommissioning costs 16,700 16,700Special Early Retirement Plan -3,762Total regulatory assets $ 35,348 $20,462Cash and Cash Equivalents--Cash equivalents include all highly liquid investments with originalmaturities of three months or less. Cash equivalents consist primarily of commercial paper, stated atcost, which approximates market.Fossil Fuels and Materials and Supplies-Coal inventories as well as materials and suppliesinventories are stated at the lower of average cost or market prices.Recoverability of Long-Lived Assets-The Cooperative accounts for the impairment or disposal oflong-lived assets, such as property and equipment, whenever events or changes in circumstances indicatethe carrying value of an asset may not be recoverable.

An impairment loss is recognized when estimated undiscounted cash flows expected to result from the use of the asset, plus net proceeds expected fromdisposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss isrecognized, the carrying amount of the asset is reduced to its estimated fair value based on quotedmarket prices or other valuation techniques.

To date, management has determined that no impairment ofthese assets exists.Nitrogen Oxide Emission Allowances-Beginning in 2009, the U.S. Environmental Protection Agency(EPA) requires power plants to hold sufficient allowances to cover emissions of nitrogen oxide. Underthese requirements, the Cooperative is required to surrender one emission allowance per ton of nitrogenoxide emitted.

Actual emissions during 2014 did not require the Cooperative to purchase additional allowances beyond what was allocated under the program.

Actual emissions exceeded the allocation amounts during 2013, thereby requiring the Cooperative to purchase additional allowances.

As ofDecember 31, 2014 and 2013, allowances are recorded in inventory at lower of average cost or marketprices at a total cost of $0 and $40, respectively.

The obligation to EPA to meet 2014 and 2013emissions are $0 and $40, respectively, and have been charged to plant expense.

The transfer to EPA forthe 2013 annual allowances occurred in May 2014. The transfer to EPA for the 2014 annual allowances is expected to occur in May 2015. The remaining allowances in inventory as of December 31, 2014 willbe surrendered to EPA, as applicable, under the terms of the consent decree described in Note 10.Sales of Electric Energy-Revenues from sales of electric energy are recognized when energy isdelivered.

The class A wholesale rates approved by the Cooperative's board of directors (the "Board ofDirectors")

have a power cost adjustment that allows for increases or decreases in class A memberpower billings based upon actual power costs compared to plan. For 2014 and 2013, the power costadjustment to the class A members resulted in charges to sales billed of $1,454 and $926, respectively.

These amounts are recorded in sales of electric energy in operating revenues on the consolidated statements of revenues,

expenses, and comprehensive income.Other Operating Revenue-Other operating revenue primarily includes revenue received fromtransmission service and is recorded as services are provided.

During 2014, the Cooperative's board ofdirectors implemented a revenue deferral plan which was approved by RUS in February 2015. Otheroperating revenue for 2014 was reduced by $2,200 which will be deferred into 2015 revenuerecognition.

Accounting for Energy Contracts-Contracts that did not meet the accounting definition of aderivative are accounted for at historical cost. The Cooperative's energy contracts that qualify asderivatives continue to be accounted for at fair value, unless those contracts meet the requirements ofand have been designated as "normal purchase/normal sale." The Cooperative does not have any energycontracts that are required to be accounted for at fair value as of December 31, 2014 and 2013.Nonoperating Margin-The nonoperating margin for the years ended December 31, 2014 and 2013,includes the following:

20142013Investment incomeInvestment income on nuclear decommissioning funds:Net earningsRealized gainsRealized losses and losses due to OTTIProvision-recorded as estimated decommissioning liabilities Other$ 3,643 $ 2,5551632,302(2,978)5131,5641,0749,280(6,163)(4,191)1,195Nonoperating margin$ 5,207 $ 3,750Use of Estimates-The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure ofcontingent assets and liabilities at the date of the consolidated financial statements, and the reportedamounts of revenue and expenses during the reporting period. Significant estimates in the consolidated financial statements relate to inventory

reserve, postretirement benefit obligations, asset retirement obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies.

Actual results coulddiffer from those estimates.

Accumulated Other Comprehensive Income (Loss)--Accumulated other comprehensive income(loss) is comprised solely of a postretirement health insurance obligation.

See additional information inNote 11. The components for the years ended December 31, 2014 and 2013 are as follows:20142013Balance-beginning of yearRecognition in expense:Amortization of prior service costAmortization of unrecognized actuarial (gain) lossActuarial assumption changesPlan changesNet other comprehensive (loss) income$3,098 $(1,576)(102) (223)(184) 175(93) 5,540-(818)(379) 4,674$2,719 $ 3,098Balance-end of yearConcentration of Risk-During fiscal years 2014 and 2013, the Cooperative derived 10% and 9%,respectively, of its revenue from a single customer.

Approximately 44% of the labor force for the Cooperative is under a collective bargaining agreement that expires January 31, 2017.Subsequent Events-The Cooperative considered events for recognition or disclosure in theconsolidated financial statements that occurred subsequent to December 31, 2014, through March 26,2015, the date the consolidated financial statements were available to be issued. All material subsequent events have been disclosed in these consolidated financial statements.

2. RECENTLY ISSUED ACCOUNTING STANDARDS UPDATESIn May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenuefrom Contracts with Customers (Topic 606), which is effective for the Cooperative in 2018.The core principle of the guidance is that an entity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which the entityexpects to be entitled in exchange for those goods or services.

Management is in the process ofevaluating the guidance in this Accounting Standards Update and has not yet determined if the adoptionof this standard will have a material impact on the Cooperative's consolidated financial statements.

3. INCOME TAXESThe Internal Revenue Service has determined that Dairyland is exempt from federal income taxes underSection 501(c)(12) of the Internal Revenue Code. Accordingly, the Cooperative's utility operations aregenerally exempt from federal and state income taxes, and, no provision for such taxes is recorded in theconsolidated financial statements.

4. AVAILABLE-FOR-SALE INVESTMENTS Investments in the nuclear decommissioning trust (NDT), under debt agreements and other holdings areclassified as available-for-sale, recorded at fair value, and include the following as of December 31,2014 and 2013:Fair ValueDebt2014 NDT Agreements Other TotalCash and cash equivalents

$ 3,338 $3,777 $ -$ 7,115U.S. government securities 47,705 --47,705Corporate bonds 18,964 --18,964Common stocks 19,951 --19,951Foreign obligations 2,996 --2,996$92,954 $3,777 $ -$96,731 Fair ValueDebtNDT Agreements Other Total2013Cash and cash equivalents

$ 2,860 $3,774 $ 28,220 $ 34,854U.S. government securities 34,431 --34,431Corporate bonds 15,555 -15,555Common stocks 35,213 -35,213Foreign obligations 3,339 -3,339$91,398 $3,774 $28,220 $123,392Investments under debt agreements represent amounts arising from the sale of assets that areencumbered by mortgages and restricted by the RUS for use on future generation and transmission construction projects.

The contractual maturities of marketable debt securities, which include U.S. government securities, foreign obligations, and corporate bonds, as of December 31, 2014, are as follows:Fair Value CostDue within 1 year $ 399 $ 398Due after 1 year through 5 years 25,748 25,776Due after 5 years through 10 years 12,216 12,324Due after 10 years 31,302 32,823$69,665 $71,321Information regarding the sale of available-for-sale marketable securities, including nucleardecommissioning trusts, for the years ended December 31, 2014 and 2013, is as follows:2014 2013Proceeds from sale of securities

$133,774

$210,300Realized gains 1,318 4,731For the purposes of determining realized gains and losses, the cost of securities sold is based uponspecific identification.

Securities in the portfolio are reviewed to determine whether they have been other-than-temporarily impaired.

The Cooperative has recorded impairment write-downs of its investments of $1,994 and$1,614 in 2014 and 2013, respectively, as the Cooperative cannot represent that it has the intent andability to hold securities until they recover in value, since that decision is outside of its sole control.

Inaccordance with restrictions enacted by the Nuclear Regulatory Commission, the Cooperative does notcontrol the day-to-day management of nuclear decommissioning trust fund investments.

The nucleardecommissioning trust of the Cooperative is managed by independent investment managers withdiscretion to buy, sell, and invest to achieve the broad investment objectives set forth by theCooperative.

Investment income included in nonoperating margin on the consolidated statements of revenues, expenses and comprehensive income is net of investment fees of approximately

$255 and $432 for theyears ended December 31, 2014 and 2013, respectively.

5. LINES OF CREDITTo provide interim financing capabilities, the Cooperative has arranged committed lines of credit withavailability aggregating approximately

$300,000.

On November 18, 2011, a syndicated credit facilitywas executed with CoBank acting as lead arranger.

This facility has a five-year term and provides fundsboth for short-term working capital requirements and for capital projects until permanent financing canbe obtained.

Some capital projects will last longer than one year, but the intent is to pay down the line ofcredit as permanent funding is received.

Compensating balance requirements and fees relating to thelines of credit were not significant in 2014 and 2013. Information regarding line of credit balances andactivity for the years ended December 31, 2014 and 2013, is as follows:2014 2013Interest rate at year-end 1.12 % 1.11 %Total committed availability at year-end

$300,000

$300,000Total borrowings outstanding at year-end

$127,000

$159,000Average borrowings outstanding during year $102,615

$128,277The Cooperative also allows member cooperatives to prepay their power bills and pays interest on theseprepayments based on current short-term borrowing rates. Advances from member cooperatives totaled$13,530 and $11,416 at December 31, 2014 and 2013, respectively.

Interest expense on membercooperative advances were $103 and $96 during 2014 and 2013, respectively.

These amounts have beenincluded in interest expense in the consolidated statements of revenues,

expenses, and comprehensive income.

6. LONG-TERM OBLIGATIONS Long-term obligations as of December 31, 2014 and 2013, consist of the following:

2014 2013Federal Financing Bank obligations-i1.93-4.46%

$347,570

$273,076Federal Financing Bank obligations-4.52-6.80%

408,131 425,273Total Federal Financing Bank 755,701 698,349RUS obligations-4.125%

and grant funds 5,618 5,982CoBank notes-2.6%,

2.9%, 4.3%, 6.2%, and 7.4%. 57,194 68,263Private bonds placement obligations-3.42%

94,167 97,500Long-term debt 912,680 870,094Less current maturities (45,762)

(43,980)Total long-term obligations

$866,918

$826,114Quarterly principal and interest payments on the long-term obligations to the Federal Financing Bankextend through 2040. Long-term obligations to the RUS are payable in equal monthly principal andinterest installments through 2024. Payments on the CoBank 2.6%, 2.9%, 4.3%, 6.2%, and 7.4% notesare due monthly or quarterly through 2023. In March 2013, the Cooperative completed a $100,000private bond placement with ten investors.

The private bond placement is an amortizing 30-year termloan at an interest rate of 3.42%. Quarterly principal and interest payments on this obligation extendthrough 2043.The Cooperative

executed, filed, and recorded an indenture of mortgage, security agreement, andfinancing statement, dated as of September 13, 2011 (the "Indenture"),

between the Cooperative, asgrantor, and U.S. Bank National Association, as trustee.

The perfected lien of the Indenture onsubstantially all of the Cooperative's assets secured equally and ratably all of the Cooperative's long-term debt with the exception of unsecured notes to CoBank (balances of $34,917 and $41,354 atDecember 31, 2014 and 2013, respectively).

The Cooperative is required to maintain and has maintained certain financial ratios related to earnings in accordance with the covenants of its loan agreements as ofDecember 31, 2014.

Scheduled maturities of the Cooperative's long-term obligations as of December 31, 2014, were asfollows:Years EndingDecember 3120152016201720182019Thereafter

$ 45,76246,75546,67642,28241,660689,545$912,680Total7. LEASESOperating Leases-The Cooperative has entered into lease agreements under which it is the lessee onan operating lease for a Caterpillar coal dozer, six rail cars, and fleet vehicles.

These transactions arecovered in the master lease agreement and have lease terms ranging from four to 15 years. At the end ofthe leases, the Cooperative can either purchase the equipment at fair market value, continue to lease theassets, or return the equipment to the lessor. Rent expense was $757 and $820 in 2014 and 2013,respectively.

The schedule of future minimum lease payments as of December 31, 2014, is as follows:Years EndingDecember 3120152016201720182019Thereafter Total$ 530353123706776$1,219 Capital Leases-The Cooperative has entered into several capital lease agreements for work equipment and computer equipment.

The transactions are covered in the master lease agreement with lease terms offour, five, or nine years. At the end of the lease, the Cooperative can purchase the equipment for abargain purchase price. The gross amount of the leases was $4,090 and $1,120 as of December 31, 2014and 2013, respectively.

The accumulated amortization of the capital leases was $1,155 and $659 as ofDecember 31, 2014 and 2013, respectively.

The principal and interest payments were $1,026 and $691in 2014 and 2013, respectively.

The schedule of future minimum lease payments as of December 31,2014, is as follows:Years EndingDecember 3120152016201720182019Thereafter

$1,0449846656245529194,788(745)Total minimum lease paymentsAmounts representing interestPresent value of minimum lease payments4,043Current maturities (857)$3,186Long-term capital lease obligations

8. FINANCIAL INSTRUMENTS The fair value of the Cooperative's financial instruments other than marketable securities and short-term borrowings, based on the rates for similar securities and present value models using current ratesavailable as of December 31, 2014 and 2013, is estimated to be as follows:20142013RecordedValueFairValueRecordedValueFairValueAssets:Other property and investments Investments in capital termcertificates of NRUCFCLiabilities-long-term obligations

$ 10,197 $ 10,197 $ 38,217 $ 38,2179,176 9,176 9,176 9,176912,680 1,151,253 870,094 1,025,101 Assets and Liabilities Measured at Fair Value-Accounting principles generally accepted in theUnited States of America establish a framework for measuring fair value by creating a hierarchy forobservable independent market inputs and unobservable market assumptions and provides for requireddisclosures about fair value measurements.

Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented herein arenot necessarily indicative of the amounts that could be realized in a current market exchange.

A description of the inputs used in the valuation of assets and liabilities are as follows:Level 1 inputs utilize observable market data in active markets for identical assets or liabilities.

Level 2inputs consist of observable market data, other than that included in Level 1, that are either directly orindirectly observable.

Level 3 inputs consist of unobservable market data, which are typically based onan entity's own assumptions of what a market participant would use in pricing an asset or liability asthere is little, if any, related market activity.

In instances where the determination of the fair valuemeasurement is based on inputs from different levels of the fair value hierarchy, the level in the fairvalue hierarchy within which the entire fair value measurement falls is based on the lowest-level inputthat is significant to the fair value measurement in its entirety.

The Cooperative's assessment of thesignificance of a particular input to the fair value measurement in its entirety requires judgment andconsiders factors specific to the asset or liability.

The following table summarizes the Cooperative's assets and liabilities measured at fair value on arecurring basis as of December 31, 2014 and 2013, aggregated by the level in the fair value hierarchy within which those measurements fall:Fair Value Measurements UsingQuoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs2014 Fair Value (Level 1) (Level 2) (Level 3)Assets-investments:

Nuclear decommissioning funds $ 92,954 $92,954 $ -$Investments under debt agreements-marketable securities 3,777 -3,777Other property and investments 10,197 1,157 -9,040Investments in capital term certificates ofNational Rural Utilities Finance Corporation 9,176 --9,176Investment for deferred compensation 1,649 -1,649 -$117,753

$94,111 $5,426 $18,216Fair Value Measurements UsingQuoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs2013 Fair Value (Level 1) (Level 2) (Level 3)Assets-investments:

Nuclear decommissioning funds $ 91,398 $ 91,398 $ -$Investments under debt agreements-marketable securities 3,774 -3,774Other property and investments 38,217 29,495 -8,722Investments in capital term certificates ofNational Rural Utilities Finance Corporation 9,176 --9,176Investment for deferred compensation 1,615 1,615 -$144,180

$120,893

$5,389 $17,898 There were no significant transfers between Levels 1, 2, and 3 in 2014. The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the years ended December 31, 2014and 2013, are as follows:2014 2013Other property and investments:

Balance-beginning of year $ 8,722 $9,072New investment and loans made 875 350Loan repayments received and current maturities (207) (321)Patronage capital allocations 250 246Refunds of deposits (600) (625)Balance-end of year $ 9,040 $8,722The valuation of these assets involved management's judgment after consideration of market factors andthe absence of market transparency, market liquidity, and observable inputs.9. RETIREMENT OF CAPITAL CREDITSThe Cooperative's Board of Directors has adopted a policy of retiring capital credits allocated tomembers on a first-in, first-out basis. As part of an equity development strategy adopted in 2003,patronage capital retired will be limited to no greater than 2% of the total assigned patronage capitalbalance as of December 31 of the prior year. This policy is subject to annual review and approval by theBoard of Directors and the RUS, and no cash retirements are to be made which would impair thefinancial condition of the Cooperative or violate any terms of its agreements.

Since 2003, the amount ofnonoperating margins assigned to members each year is at the discretion of the Board of Directors.

Anyunassigned nonoperating margins will become unallocated reserves and part of permanent equity.Patronage capital amounts for the years ended December 31, 2014 and 2013, are as follows:Assigned Unassigned TotalBalance-December 31, 2012 $156,500

$36,356 $192,856Retirement of capital credits (3,130) -(3,130)Current year margins 17,079 4,937 22,016Balance-December 31, 2013 170,449 41,293 211,742Retirement of capital credits (3,409) -(3,409)Current year margins 15,783 7,080 22,863Balance-December 31, 2014 $182,823

$48,373 $231,19610. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation, transmission, and distribution agreements, underwhich costs and/or revenues are recognized currently based upon the Cooperative's interpretations of theprovisions of the related agreements.

Differences between the estimates used in the consolidated financial statements and the final settlements are recorded in the year of settlement.

The Cooperative has entered into various coal purchase contracts with one- to four-year terms. Theestimated commitments under these contracts as of December 31, 2014, were $98,866 in 2015, $29,180.in 2016, $10,335 in 2017, and $1,655 in 2018.On August 27, 2012, a consent decree (CD) between the Cooperative, the EPA, and the Sierra Club wasentered by the U.S. District Court concluding litigation regarding alleged violations of New SourceReview and other provisions of the Clean Air Act. Under the CD, the Cooperative will install new andoperate existing pollution control equipment at its coal generation stations or cease burning coal atcertain facilities, and achieve required reductions in sulfur dioxide, nitrogen oxide, and particulate emissions.

The CD was modified in 2014 when the EPA agreed to extend by eight months the time forthe Cooperative to comply with the CD's 30-day rolling average sulfur dioxide emission rate for one ofthe units at the Alma/J.P.

Madgett plant if the Cooperative offsets additional emissions caused by thedelay by reducing overall pollution from the Alma/J.P.

Madgett plant beyond the levels required by theoriginal CD. As part of the CD modification, the Cooperative ceased burning coal in the Alma#4 and #5boilers by December 31, 2014. Approval of the CD modifications was received by the U.S. DistrictCourt on April 28, 2014. The CD requires the Cooperative to spend $5,000 on environmental mitigation projects within five years of EPA's April 2013 approval of the projects which will include participation in major solar projects.

The Cooperative reflected the cost and obligation of this requirement in deferredcharges and deferred

credits, respectively.

During 2013, the $4,500 cost of the remaining environmental mitigation projects in deferred charges was charged to expense.

Also during 2013, the remaining

$4,500obligation for environmental mitigation projects was reduced by $84 spent on approved projects.

During2014, the remaining

$4,416 obligation for environmental mitigation projects was reduced by $772 spenton approved solar and other projects.

The estimated

$1,485 cost of 2015 solar and other projectsparticipation is included in accrued expenses.

The Cooperative has been named as a defendant in various lawsuits and claims arising in the normalcourse of business.

Although the outcome of these matters cannot be determined at the present time,management and legal counsel believe these actions can be successfully defended or resolved without amaterial effect on the consolidated financial

position, results of operations, or cash flows of theCooperative.

11. EMPLOYEE BENEFITSMultiemployer Defined-Benefit Pension Plan-Pension benefits for substantially all employees areprovided through participation in the National Rural Electric Cooperative Association (NRECA)Retirement Security Plan ("RS Plan"). This is a defined benefit pension plan qualified under Section 401and tax-exempt under Section 501 (a) of the Internal Revenue Code. Pension benefits are funded inaccordance with the provisions of the RS Plan and are based on salaries, as defined, of each participant.

The Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension PlanAmendment Act of 1980, imposes certain liabilities on employers who are contributors tomultiemployer plans in the event of a plan termination or an employer's withdrawal.

These plans havenot been terminated, nor has the Cooperative undertaken any plans to withdraw from participation.

Sincethe RS Plan is a multiemployer plan for accounting

purposes, all plan assets are available to pay benefitsof any plan participant.

Separate asset accounts are not maintained for participating employers.

Thismeans that assets contributed by one employer may be used to provide benefits to employees of otherparticipating employers.

The Cooperative may be contingently liable for its share of the RS Plans'unfunded vested liabilities.

The Cooperative's contributions to the RS Plan in 2014 and 2013 represented less than 5% of the totalcontributions made to the plan by all participating employers.

In 2013, the Cooperative made a voluntary prepayment of $26,899 to this plan to reduce future contribution amounts.

Expense for this pension plan was $10,553 in 2014 and $10,970 in 2013. The 2014 expense includes contributions to the plan of$7,863 and $2,690 of prepayment amortization.

The 2013 expense includes contributions to the plan of$8,280 and $2,690 of prepayment amortization.

In the RS Plan, a "zone status" determination is not required, and therefore not determined, under thePension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assetsare not determined or allocated separately by individual employer.

In total, the RS Plan was over 80%funded on both January 1, 2014 and 2013, based on the PPA funding target and PPA actuarial value ofassets on those dates.Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans andsurcharges are not applicable.

Future contribution requirements are determined each year as part of theactuarial valuation of the plan and may change as a result of plan experience.

Postretirement Health Insurance Obligation-Certain employees of the Cooperative retiring at orafter age 55 are eligible to participate in a postretirement health care plan through age 65. Eligibledependents of the retired Cooperative employees are also eligible to participate in this plan throughage 65. Retirees pay 100% of the premium amount for this coverage.

The premium is based upon thecombined medical claims experiences of all active employees and retirees.

If premiums were determined based upon the medical claims experience of retirees only, the resulting premium for retirees would behigher. The difference between the premium paid by retirees and the potential actual premium amount isthe basis for the postretirement benefit obligation.

The Cooperative uses a December 31 measurement date for its plan. The postretirement health care planis unfunded.

During 2013, a plan change included the addition of a lower cost high-deductible healthplan as an option of available plans to union employees effective for 2014.The accumulated postretirement benefit obligation (APBO) and the amounts recognized in theconsolidated financial statements as of and for the years ended December 31, 2014 and 2013, are asfollows:2014 2013Amount recognized in the consolidated balance sheets:Total accrued qualified and nonqualified benefit obligation

$ 4,330 $ 3,779Less current portion included in accrued expenses-other (217) (166)Long-term portion $ 4,113 $ 3,613Change in benefit obligation:

APBO-beginning of year $ 3,779 $ 8,077Service cost 177 413Interest cost 161 258Plan changes -818Actuarial loss (gain) 93 (5,540)Participant contributions 373 -Benefits paid (253) (247)APBO-end ofyear $ 4,330 $ 3,779Funded status of plan-December 31 $ (4,330) $ (3,779)Accrued postretirement health insurance obligations recorded at year-end

$ 4,330 $ 3,779(Continued)

Change in plan assets:Fair value of plan assets-beginning of yearEmployer contribution Benefits paidFair value of plan assets--end of year2014 20135 -253 247(253) (247)Change in accumulated other comprehensive income (loss):Net income (loss) at prior measurement datePlan changesActuarial assumption changesRecognition in expense:Amortization of prior service costAmortization of unrecognized actuarial (gain) lossAccumulated other comprehensive income (loss)Components of net periodic postretirement benefit cost:Service cost-benefits attributed to service during the yearInterest cost on accrued postretirement health insurance obligation Amortization of prior service costAmortization of unrecognized actuarial (gain) loss$ 3,098 $ (1,576)-(818)(93) 5,540(102) (223)(184 175$ 2,719 $ 3,098$ 177161(102)(184)$ 413258(223)175Net periodic postretirement benefit expense$ 52 $ 623(Concluded)

Employer cash contributions expected to be made to the plan during the fiscal year ending December 31,2015, is $217. The amount of accumulated other comprehensive income expected to be recognized during the fiscal year ending December 31, 2015, is an actuarial gain of $158 and amortization of priorservice cost of $102.For measurement

purposes, a 4.36% and 3.25% discount rate was assumed for 2014 and 2013,respectively, to determine net periodic benefit cost. The 2014 and 2013 annual health care cost increaseassumed is 7.70% and 8.10%, respectively, decreasing gradually to 4.65% for 2031 and thereafter.

Aone percentage point increase in the assumed health care cost trend rates would increase the total ofservice and interest cost components by $50 and the end-of-year APBO by $458. A one percentage pointdecrease in the assumed health care cost trend rates would decrease the total of service and interest costcomponents by $42 and the end-of-year APBO by $396.Estimated future benefit payments from the plan as of December 31, 2014, are as follows:Years EndingDecember 31201520162017201820192020-2024

$ 2172192422703221,607 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligibleemployees.

Eligible participants may make pretax contributions, as defined, with the Cooperative matching up to 2.5% of the participants' annual compensation.

Contributions to this plan by theCooperative were $1,136 and $1,071 for 2014 and 2013, respectively.

Accrued Sick Leave Benefit-Certain employees are eligible to receive amounts at the time ofretirement related to a discontinued sick leave policy. Eligible employees will be paid for a fixed numberof sick leave hours at the wage rate in effect at retirement.

The total liability was $1,349 and $1,590 asof December 31, 2014 and 2013, respectively.

The cost for this sick leave benefit was $31 in 2014 and$23 in 2013.Other Plans-The Cooperative offers key employees deferred compensation plans available throughNRECA. The plans permit qualifying employees to defer a portion of their salary until future years. Theaccumulated deferred compensation balance is not available to employees until termination, retirement, or death.All amounts of compensation deferred under the plans and all income attributable to those amounts(until paid or made available to the employee or other beneficiary) are solely the property and rights ofthe Cooperative (not restricted to the payment of benefits under the plan), subject only to the claim ofgeneral creditors.

Participants' rights under the plans are equal to those of general creditors of theCooperative in an amount equal to the fair market value of the deferred account for each participant.

Therelated assets and liabilities, totaling

$1,649 and $1,615 as of December 31, 2014 and 2013, respectively, are reported at contract value, which approximates fair value.The Cooperative also provides employees with medical insurance

coverage, short-term and long-term disability, and life insurance, which are funded by employer and employee contributions.

TheCooperative's costs related to these benefits were $8,222 and $8,687 for 2014 and 2013, respectively.

The liability for these plans of $665 and $694 as of December 31, 2014 and 2013, respectively, arerecorded in accrued expenses.

During 2013, the Cooperative announced a special early retirement plan through NRECA to be offeredto certain age-eligible employees at specific Cooperative locations.

Participation was effective July 1,2014. Provisions of the plan include waiving the discount that is otherwise applied to pension benefitsfor employees electing retirement between ages 55 and 62, as well as a supplemental monthly paymentto the employees for a minimum of 18 months or through age 65. The $3,506 cost of this plan wasexpensed in 2014. At December 31, 2014, the obligation for the plan is included in accrued expenses inCurrent Liabilities as payment was made to NRECA in February 2015. At December 31, 2013, theobligation for the plan was included in accrued benefits in Other liabilities.

12. RELATED-PARTY TRANSACTIONS The Cooperative provides electric and other services to its class A members.

The Cooperative receivedrevenue of $347,078 and $343,327 in 2014 and 2013, respectively, for these services.

The Cooperative has accounts receivable from its class A members of $33,500 and $33,008 as of December 31, 2014 and2013, respectively.

The Cooperative has advances from class A members of $13,530 and $11,416 as of December 31, 2014and 2013, respectively, related to the prepayment program.

Class A members have the option of payingtheir electric bill in advance, and in turn, the Cooperative pays the members' interest income. TheCooperative's interest expense related to the prepayment program was $103 and $96 in 2014 and 2013,respectively.

The Cooperative has interest-bearing loan receivables from class A members of $605 and $797 as ofDecember 31, 2014 and 2013, respectively.

These loan receivables, which are recorded as part of otherassets, are related to the economic development

program, wherein class A members can borrow fundsfrom the Cooperative, which the members, in turn, loan to economic development projects in theirservice territories.

These loans are typically repaid to the Cooperative over 10 years. The Cooperative recorded interest income related to the economic development program of $21 and $30 in 2014 and2013, respectively.

13. LONG-TERM POWER AGREEMENTS The Cooperative has a power agreement with Great River Energy (GRE) to share costs and benefits of a345-megawatt coal-fired generating unit ("Genoa Station #3") located in Genoa, Wisconsin.

Under theagreement, GRE pays for 50% of the costs of operating the plant and GRE is entitled to take 50% of theoutput of the plant. This agreement remains in effect until the payment in full of all obligations arisingfrom the construction and operation of the unit. The Cooperative provided substantially all the financing for the construction of the unit and GRE does not guarantee any portion of any debt of the Cooperative.

As a result, the Cooperative records the assets, debts, and operating costs of Genoa 3 on the consolidated financial statements.

Energy charges to GRE under the agreement were $45,281 and $41,381 during2014 and 2013, respectively.

As of December 31, 2014, GRE had $6,568 on deposit with theCooperative for its share of the 2014 estimated operating coal inventory at Genoa 3.In February 2015, the Cooperative and GRE agreed to terms which will allow GRE to end its purchaseof power and energy under the agreement as of June 1, 2015 upon prepayment by GRE of approximately

$83,500 for certain obligations.

GRE will remain responsible for its share of eventual decommissioning costs and of any liability for disposal of coal combustion byproducts.

The transaction is subject toexecution of definitive agreements and regulatory approval.

None of the settlement amount is reflected in the consolidated balance sheets or statements of revenues,

expenses, and comprehensive income for2014.14. ASSET RETIREMENT OBLIGATIONS An asset retirement obligation (ARO) is the result of legal or contractual obligations associated with theretirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. The Cooperative determines these obligations basedon an estimated asset retirement cost adjusted for inflation and projected to the estimated settlement dates and discounted using a credit-adjusted risk-free interest rate. Upon initial recognition of a liability for ARO, the Cooperative capitalizes the asset retirement cost by increasing the carrying amount of therelated long-lived asset by the same amount as the liability.

The Cooperative allocates that assetretirement cost to expense using the straight-line method over the remaining useful life of the relatedlong-lived asset. The accretion of the obligation is recognized over time up to the settlement date. Anyfuture change in estimate will be recognized as an increase or a decrease in the carrying amount of theliability for an ARO and the related asset retirement cost capitalized as part of the carrying amount ofthe related long-lived asset.The Cooperative determined that it has AROs related to future removal and disposal of asbestos at itspower plants. The Cooperative recorded no additional liability to its discounted liability in 2014 and2013 related to this obligation.

There are no assets legally restricted for purpose of settling the AROrelated to future removal and disposal of asbestos.

This ARO is recorded in other noncurrent liabilities inthe consolidated balance sheets.

The Cooperative has established a decommissioning trust to accumulate the estimated amountsnecessary to decommission a nuclear power plant that the Cooperative formerly operated and the relatedIndependent Spent Fuel Storage Installation (ISFSI).

The assets of this trust in the amount of $92,954 asof December 31, 2014, and $91,398 as of December 31, 2013, are outside the Cooperative's administrative control and are available solely to satisfy the future costs of decommissioning.

Thenuclear decommissioning obligation is recorded in the consolidated balance sheets in other noncurrent liabilities.

A reconciliation of the beginning and ending aggregate carrying amount of the obligations as ofDecember 31, 2014 and 2013, is as follows:2014 2013Balance-beginning of year $ 94,764 $80,735Accretion in ARO 74 32Incurred costs on decommissioning projects (6,156) (5,880)Provision recorded as decommissioning liabilities 3,624 19,877Balance-end of year $92,306 $94,764The Cooperative did not record a conditional ARO related to the dismantlement of the dam and drainagereservoir for the hydro generation plant at Flambeau, the restoration of land to preexisting condition atGenoa Station #3 site related to the land rights permit, and the removal of transmission lines in variouscorridors, because the Cooperative does not have sufficient information to estimate the fair value of theARO.15. NUCLEAR REACTORThe La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by theCooperative effective April 30, 1987. The intent was to terminate operation of the reactor, and apossession-only license was obtained from the Nuclear Regulatory Commission in August 1987.Under the Nuclear Waste Policy Act of 1982, the United States government is responsible for thestorage and disposal of spent nuclear fuel removed from nuclear reactors.

LACBWR will remain in safestorage status (SAFSTOR) until the final stage of decommissioning of LACBWR, involving dismantlement and decontamination, can be completed.

By statute and under contract, the United Statesgovernment was to have begun accepting spent fuel in January 1998, but has not yet licensed andestablished a repository.

The Cooperative filed an initial breach of contract damages claim against theUnited States government in the United States Court of Federal Claims to recover its costs generally incurred after 1998 through 2006 related to spent fuel remaining at LACBWR. The Cooperative filed asecond contract damages claim in December 2012 to recover its costs generally incurred from 2007through 2012. The trial for the second claim is expected to be scheduled in 2015. Subsequent suits willbe brought to recover the continuing costs arising from the presence of the spent fuel. For 2014 and2013, none of the second claim potential award damages are reflected in the consolidated balance sheetsor consolidated statements of revenues,

expenses, and comprehensive income. The initial claim wastried in July 2008 and resulted in a damages award in December 2009, with all appeals efforts concluded during 2012. In January 2013, the Cooperative received payment of $37,659 from the government forthe damages award. For 2013, a regulatory liability for this amount was created to reflect the obligation to the class A members who had paid these costs as part of their rates during 1999-2006.

Also in 2013,$18,848 of that regulatory liability was refunded to class A members and the remainder was offsetagainst prior nuclear related regulatory assets.

The Cooperative completed the temporary dry storage facility project located on the LACBWR site andcompleted the move of the LACBWR spent nuclear fuel to this ISFSI facility in September 2012.Annual ISFSI costs are recorded on an as incurred basis and incorporated into the annual budget and ratemaking process.

The current decommissioning plan calls for completion of decommissioning LACBWR, not including the ISFSI, by the end of 2025. The estimated costs of decommissioning thenuclear generating facility are based on a decommissioning cost study. Costs incurred fordecommissioning projects are charged against the decommissioning liability.

The Cooperative's policyis to provide additional funding of the nuclear decommissioning trust, as necessary, through rates orthrough transfers from supplemental funds, and with future earnings, to ensure that the trust will besufficient to cover final decommissioning expenses.

The annual decommissioning

expense, SAFSTOR,and ISFSI costs are recovered from the class A members.

Earnings on the nuclear decommissioning funds and the equivalent provision for nuclear decommissioning costs are recorded as nonoperating

margins, since the plant is no longer in service.-26 -